We present a quick analysis of Nitesh Estates' Chamiers Road, Boat Club in Chennai deal. Nitesh Estate won a bid for a 9 acre church land for Rs 6,300 million (Rs 700 mm an acre). The company plans to develop 1 mm square feet at the site, comprising a five-star hotel, shopping mall, office block and a residential block.
As per the company's development plans of 1 mm sq ft, it will have to achieve an average selling price of ~Rs 14,500 psf or a monthly rental of Rs 120psf per month for sustaining a 22% PAT Margin. This assumption is at a significant premium to prevailing rentals of Rs 60-65 psf in the area (for commercial). The residential prices are high in the micro market ranging between Rs 13,000-16,000 psf. (Source C&W, JLL). Clearly Nitesh Estates bid will be financially viable only if prices/rents increase from current levels in the micro market. Else, Nitesh Shetty will be upset in the Real Estate Grandslam :-)
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